Samsung Electronics Discards Plan to Transit into Holding Company Structure

Announces plan to eliminate all treasure stocks the company owns worth 54 trillion won

27(Sat), May, 2017

Samsung Electronics has decided against shifting into a holding company structure. The move is expected to have a ripple-effect since it means that Samsung Electronics Vice Chairman Lee Jay-yong will give up efforts to reform governance to strengthen his control over the company.

Samsung Electronics held a board of directors' meeting on April 27 and decided not to shift into a holding company structure. Vice Chairman Kwon Oh-Hyun told the board last month that the shift into a holding company structure may be unlikely at this state. Samsung Electronics' decision to give up on the shift came as a surprise move. The plan to transit into a holding company structure had drawn keen attention, as it may be considered as a move to eliminate a chain of cross-holdings through stakes among subsidiaries and help Vice Chairman Lee and his family members' control subsidies.

Last October, U.S. activist hedge fund Elliot Management proposed a split for a shift into a holding company structure. In accordance with the proposal, Samsung Electronics announced ways of raising shareholders' value. Samsung Electronics had studied ways of shifting into a holding company structure with outside experts.

Explaining the background behind the discarding of the plan to transit into a holding company structure, Samsung Electronics said the shift does not contribute to enhancing the company's overall competitiveness and it could cause a burden to businesses through diverting of management capabilities.

Samsung Electronics also announced a plan to eliminate all treasury stocks worth 54 trillion won. The decision means the elimination of a possible reversing of a decision not to shift into a holding company structure. Samsung Electronics now owns treasury stocks accounting for 13.3 percent of all shares issued by the company. The value of the treasury stock stands at 54 trillion won based on the closing price on April 27.

Samsung Electronics also announced a plan to purchase an additional treasury stock worth 9 trillion won.

Experts said Samsung Electronics' latest move may be construed as the company's move to transform itself into a shareholders' management company, departing from owner family-oriented company.

Samsung Electronics decided to offer a quarterly dividend of 7,000 won per share, the first-ever one on a quarterly basis.

Thanks to a charming business performance of the semiconductor business, Samsung Electronics posted 50.55 trillion won in sales and 9.9 trillion won in operating profit in the first quarter of this year. The figures represent a 1.54 percent rise and a 48.27 percent jump over those during the same period of last year, respectively.

Samsung Electronics’ company flag in front of the company's building in Seocho-dong, southeastern Seoul. (Photos: Samsung Electronics)